iptiQ: The technology making it easier to buy insurance
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Motorists can use black box telematics to bring their car insurance premiums down 1 and some life and health insurers are offering deals based on data from fitness wearables.
But these developments are the exception rather than the rule for an industry struggling to become truly digital.
Buying insurance, especially life and health policies, can be a long and difficult process.
While digital technologies promise to make buying insurance easier, nine out of 10 insurers say they are struggling to develop the technology infrastructure they need to support digitisation.
As a result, 76% of insurers agree they need to partner with start-ups and technology platforms to stay competitive in the digital era.
Swiss Re’s partnering solution, iptiQ, allows insurers to harness the power of cloud-based applications and data analytics to make buying insurance easier, and to help more people to become insured.
Imagine saying "Alexa, buy insurance" and whatever policy you need is purchased. You wouldn't even have to say what type of insurance policy you require, as the artificial intelligence (AI) working in the background will already have worked out when your renewals occur, and what your preferences for any given policy would be.
These kinds of innovations are already occurring in other industries, such as online retail. Amazon 2 for example, can automatically select the best-matched product to your Alexa voice command, while UK online supermarket Ocado uses AI to offer an automated weekly grocery shop based on a customer’s preferences and how long it takes them to use certain items3.
However, despite some uses of technology such as telematics in motor insurance and the emerging use of wearable fitness technology in life and health, buying an insurance policy with a single voice command still remains in the realms of science fiction.
This is because the whole end-to-end process of buying an insurance policy can be incredibly complex.
Slow and difficult
For the potential customer, particularly in life and health insurance, the buying process can be hugely time-consuming, with the completion of multiple forms and even occasionally a medical examination.
This customer-facing complexity is the result of multiple back-end processes that are typically required ahead of issuing a policy.
The labyrinthine nature of insurance is not only frustrating for the customer; it is also incredibly inefficient. A McKinsey survey estimates that insurers have as much as 30-40% of their expenses locked up in their top 20 to 30 core end-to-end processes.
Despite this fact, just under 11% of InsurTech deals in 2017 were focussed on end-to-end solutions across the whole insurance value chain.
The low levels of investment in end-to-end solutions may be a reflection of just how difficult it is to make insurance truly digital: the survey by McKinsey found that nine out of 10 insurers acknowledge that they are struggling to develop the technology infrastructure they need to support digitisation.
"The size and complexity of their IT systems, many of which are based on dated legacy platforms, are a barrier to the rapid development that characterises digital," says the McKinsey report, The Making of a Digital Insurer.
Overcoming internal IT challenges can be a long and difficult process for insurers.
In response, many are choosing to improve their digital offerings more rapidly by partnering with others.
According to a survey by Accenture, 46% of insurers are partnering with start-ups and other external organisations on digital solutions. And 76% agreed that their competitive advantage “would not be determined by their organisation alone, but rather by the strength of the partners and ecosystems they choose”.
In the life and health sector, insurers from across Europe and the US are choosing to partner with Swiss Re's iptiQ. This is a totally digital platform that allows insurers to easily create new and highly customisable products. iptiQ does not sell directly to the consumer. Instead it provides digital, transparent and bespoke protection products in a B2B2C manner.
The platform combines Swiss Re's automated underwriting system, Magnum, with data analytics and customisable customer-facing web applications.
All the data from customers using the platform runs through the analytics software and is used to improve both the automated underwriting and the customer experience.
So far, more than 65,000 policies have run through the platform, which was launched in 2014. For Chief Marketing Officer iptiQ EMEA L&H Marco Kamerling, it is the ability to have the data insights from so many policies running through the platform that makes it so powerful.
“I think the amount of data collected throughout the various partnerships we have, in the various markets, is really unparalleled compared to the more traditional insurers,” says Kamerling.
Fast and easy
The data collected by iptiQ, in compliance with applicable data protection laws, is analysed and generates new insights on how customers behave when buying insurance.
This in turn leads to a fine-tuning of the 140 product variations offered by iptiQ, which Kamerling says is helping make the customer’s buying experience faster and easier. Ultimately it could even help cut the cost of insurance policies too.
“If we are able, through the relevant data insights and improvements throughout the customer journey, to engage with the customer, we believe that we can improve conversion rates and, as such, the distribution cost to purchasing the policy,” he says.
“This is the most important feature of iptiQ because we truly believe that the costs associated with purchasing a policy are still too high.”
Marketing and distribution costs are estimated to make up anywhere between 15 and 40% of an insurance premium, according to a report by EY.
Kamerling says bringing down these costs are a critical element of making life and health insurance more accessible.
“The higher the distribution costs, the more expensive a policy is and that excludes some customer segments from buying a policy because it is viewed as being too expensive or too complex,” he says.
Kamerling believes that iptiQ can help changing “the way life insurance is sold”, even to the point of the platform being potentially available on voice assistant technology like Amazon’s Alexa.
“Technology enables us to simplify the way a policy is sold, and it helps to drive down the distribution costs associated with purchasing a policy,” he says.
“Together this allows us to access customer segments which today don’t buy a policy.”
“The choice insurers face today is whether to simply invest in digital capabilities or become digital insurers. The best performing carriers of tomorrow will choose the latter course.” - McKinsey, The Making Of A Digital Insurer.
“I think we are on our way to changing the way life insurance is sold. It is driven by our strong belief to simplify not just a life insurance product, but the way you engage with customers throughout the customer journey.” - CMO iptiQ EMEA L&H Marco Kamerling
- Five tech trends that will define the future of insurance – EY
- iptiQ – iptiQ website
- iptiQ by Swiss Re – LinkedIn iptiQ
- Fearless Innovation – Insurtech as the catalyst for change within insurance - Accenture
- Insurance and the big data technology revolution – Financial Times